THE stripping of infant formula from Australian supermarket shelves for resale in China is set to become more difficult under a draft law proposed by Beijing, which aims to tighten regulations on imported food sold online.
At present foreign food products sold via China's booming e-commerce sector are largely exempt from local regulations, but the central government appears determined to close this loophole and bring the e-commerce sector into line with traditional retailers.
If the draft law is approved in its current form it will see more stringent checks at mainland ports, a requirement for Chinese labelling and tougher food safety protocols.
While the new requirements may make it more difficult for parallel traders to buy products like infant formula, vitamins and cosmetics in Australia for re-sale online in China, the law is also likely to dent sales for smaller Australian companies which don't have operations in China or a local distributor.
At present an estimated 50 Australian companies are using this loophole to sell products online in China.
"I think the main people affected will be some of the smaller sellers on Alibaba's Taobao, who are reselling Australian and other imported foods without the labels and licensing needed for the offline channel, and often with quite informal supply chains," says Leonie Lethbridge, ANZ's regional chief operating officer, based in Shanghai.
"Longer term it will encourage businesses to establish an entity in China and to invest in the marketing and distribution of their products."
The rapid growth of online sales in China, which are forecast to double to $1 trillion by 2018, has been cited as the reason for tighter regulations.
The draft law released late last month said it aims to "standardise the supervision and administration on the safety of foods imported via cross-border e-commerce."
Ms Lethbridge said the overwhelming complaint about online sales from Chinese consumers was about fake goods.
"This new law should enable better policing of this, and better protection for consumers," says Ms Lethbridge.
"For Australian products that are already very well known in China, it should also give them better control over their brands and how their products are sold."
If the new law is strongly enforced it would make it more difficult for traders in Australia to send up the likes of Bellamy's infant formula or Blackmores vitamins to China via the post.
This is seen as a significant sales channel for both companies even though their products are registered on the mainland, as Chinese consumers remain wary about the safety of goods which have been handled in China.
Such wariness has been cited as the reason for infant formula shortages in Australian supermarkets over recent weeks and led to calls for a limit to be placed on the number of containers an individual can buy.
Traditionally parallel traders bought the likes of infant formula in Hong Kong for resale on the mainland, but this channel has been shut down by the imposition of a two-can limit on purchases after a shortage in supermarkets.
The United States Department of Agriculture said selling directly to consumers in China via e-commerce sites was an attractive first step for many smaller companies.
"Cross-border e-commerce has offered new-to-market companies a relatively easy entry to the Chinese market," the USDA said in a report.
